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Economic growth is the most important factor for Korea

Posted November. 02, 2018 07:35,   

Updated November. 02, 2018 07:35


While giving an administration speech at the National Assembly on Wednesday, President Mon Jae-in emphasized an embracing country where everyone lives well as the basic path of state affairs and made clear that he will push forward economic policy basis including income led growth. He also confirmed that domestic policies such as North Korea policies and eradicating deep-rooted evil will maintain their overall framework. Although there are still pros and cons over the diagnosis and prescription of the economic situation and the acceleration of inter-Korean relationship, President Moon’s speech clarified his will to maintain his policy direction during the past one and a half years.

President Moon said that we have accomplished the dream of “living well” and that Korea’s economic growth rate is still the highest compared to countries with similar or higher economic level. He mentioned, however, that Korea became a country with the most severe economic inequality among developed nations. In other words, he emphasized that now is the time we have to focus on distribution. 

Of course, welfare and distribution are important to all citizens. There are, however, different opinions on whether the Korean economy is at a stage where it can put everything it has on welfare and distribution rather than a tight balance between growth and welfare. “It is highly probable that a low growth of 2 percentage range that was to be for a few years may become permanent,” said President Moon, implying that a low growth trend is inevitable. The serious problem of the Korean economy recently, however, is not in the low growth rate per se but the fact that the outlook of economic growth rate is falling continuously as a result of plunging growth engine. As such, some people point out that it is too early to be complacent about the current growth rate and that we are not ready to transfer towards distribution. Growth strategy is insufficient compared to distribution strategy in this sense. In particular, it is regrettable that no specific and sophisticated strategies for future industry growth were suggested. When taking a look at the Gini’s coefficient, which demonstrates income inequality, Korea appears to be generally good as it ranks 16th place among 36 OECD member states based on 2016.

While explaining the 2019 budget worth 470.5 trillion won, which is 9.7 percent higher than this year, President Moon emphasized that “it is a period where the budget needs to take an active role.” This is a notice that the keynote of policies to increase jobs in the public sector and universal welfare will become stronger than before. Nevertheless, according to the financial policy report published by the Ministry of Strategy and Finance on Wednesday, with increased welfare, “obligatory spending,” the amount of money a nation must use, exceeds the “discretionary spending,” which allows the adjustment of spending depending of the situation, for the first time ever. Welfare expenses may be covered in a sustainable manner only when the pie expands as a result of saving the economy. We need to focus on establishing a material foundation where people can live well together in order to become an “embracing country where everyone lives well.”